U.S. Ending Stocks Are Raised While Prices Remain Strong
Domestic Situation and Outlook
Per capita flour use down again in 2009
International Situation and Outlook
U.S. Ending Stocks Are Raised While Prices Remain Strong
U.S. wheat ending stocks for 2009/10 are projected 20 million bushels higher as a reduction in expected food use pushes ending stocks to 1 billion bushels. Projected food use is lowered 20 million bushels based on the latest mill grind data from the U.S. Census Bureau. High flour extraction rates for a second straight year are reducing the amount of grain needed to produce flour. At the same time, declining per capita consumption is reducing demand for flour and wheat. Exports of all wheat are unchanged, but hard red winter wheat exports are raised 10 million bushels, with an offsetting reduction for white wheat. By-class adjustments reflect the pace of export sales and shipments to date. The projected marketing-year average farm price is raised 5 cents on both ends of the range to $4.80 to $5.00 per bushel as prices received by producers remain stronger than expected. Increased world wheat production and beginning stocks for 2009/10 more than offset an increase in wheat use, boosting projected ending stocks. The rise in beginning stocks is driven by a historical revision of Russian estimated feed use during that county’s transition to a market economy.
Domestic Situation and Outlook
Supply and Use for 2009/10
Total supplies for 2009/10, at 2,988 million bushels, are unchanged from February. Supplies for 2009/10 are up 56 million bushels from the previous year as much higher beginning stocks more than offset lower production and projected imports.
Total projected use for 2009/10 is down 20 million bushels month-to-month to 1,987 million bushels because of lower food use. Total use for 2009/10 is down 288 million bushels from the previous year because of both lower domestic use and lower exports.
Projected food use, at 920 million bushels, is down 20 million bushels month-to-month because of a higher-than-expected flour extraction rate and lower-than-expected per capita disappearance. The Census Bureau’s 2009 fourth-quarter mill grind report revealed that the flour extraction rate for the first 7 months of 2009/10 marketing year was 77.1 percent, nearly the same as 2008/09. Both years’ extraction rates are very high by historical standards. The average annual flour extraction rate from 1991/92 to 2007/08 is 74.6 percent. The highest flour extraction rate over this period was 75.9 percent in 1996/97. A high extraction rate means that fewer bushels of wheat need to be milled to produce a given quantity of flour.
The Census mill grind report also revealed that per capita flour use for 2009 was down from 2008 by 1.8 pounds (see the next section for the per capita food-use discussion).
The 20-million-bushel food use reduction is allocated across the following four classes of wheat: minus 9 million for hard red winter (HRW); minus 5 million for hard red spring (HRS); minus 4 million for soft red winter (SRW); and minus 2 million for white. The durum food use projection is unchanged from February.
Projected seed use is unchanged from February at 72 million bushels. Seed use is low because of the smallest winter wheat plantings since 1913. Seedings were down because rain-delayed row crop harvesting preventing plantings and prices were also lower at planting time. Total projected feed and residual use, at 170 million bushels, is unchanged month-to-month.
All-wheat accumulated exports to date are sharply below last year’s pace and the 5- year average. Both HRW and SRW accumulated exports are below the pace of their 5- year averages and especially below last year’s pace; however, the pace last year for these two classes was substantially above their 5-year average. Accumulated HRS exports have fallen off last year’s pace in recent weeks and are substantially behind the 5-year average. Accumulated white wheat exports are nearly on pace with the 5-year average, but substantially above last year’s pace. Accumulated durum exports sharply exceed both last year’s pace and the 5-year average. U.S. exports of durum to the European Union and North Africa are up this year.
Total projected exports for 2009/10, at 825 million bushels (and the lowest since 1971/72), are unchanged from February. They are down 190 million bushels from 2008/09 as relatively high U.S. prices and strong competition, particularly from the Black Sea exporters of Russia, Ukraine, and Kazakhstan, have limited export opportunities for U.S. wheat. The projected 2009/10 exports are down 438 million bushels from 2007/08. Exports in 2007/08 were a 15-year high as adverse weather around the world reduced global production and increased the demand for U.S. wheat. Farmers around the world responded to the high prices that resulted from the tight global stocks-to-use situation in 2007/08, and the resulting additional foreign supplies have steadily reduced the demand for relatively higher priced U.S. wheat.
There are by-class export changes from February based on the export pace to date and projected changes with U.S. export competitors. Projected HRW exports are raised 10 million bushels while white wheat exports are lowered 10 million bushels. Projected exports of the other classes are unchanged from February.
Projected ending stocks for 2009/10 are raised 20 million bushels from February to 1,001 million bushels. Ending stocks for 2009/10 are 344 million bushels above 2008/09 and 695 million bushels above 2007/08. Ending stocks for 2007/08 were the lowest since the late 1940s. The projected 2009/10 ending stocks are the highest since 1987/88. The month-to-month changes resulted in higher projected ending stocks for HRS, SRW, and white wheat. The projected ending stocks for HRW are lower, while durum is unchanged. The year-to-year percentage increase in projected all-wheat ending stocks is 52 percent. Projected ending stock increases year-to-year for HRW, HRS, SRW and durum are 65 percent, 95 percent, 21 percent, and 80 percent, respectively. In contrast, the projected ending stocks for white wheat are down year-to-year by 19 percent.
The projected marketing-year average farm price is raised 5 cents on both ends of the February range to $4.80 to $5.00 per bushel as prices received by producers remain stronger than expected.
Per capita flour use down again in 2009
Per capita all-wheat flour use for 2009 is estimated at 134.7 pounds. Per capita flour use dropped 1.8 pounds from the 2008 estimate and is now down 3.4 pounds from 2007. Flour use rose for 2 years in a row from the recent low of 134.3 pounds in 2005 to 138.1 pounds. This 2005 low was reached after sharp declines in per capita use from 146.3 pounds in 2000, apparently due to increased consumer interest in low-carbohydrate diets. The pattern is different for semolina and durum flour. Per capita semolina and durum flour use for 2009 is estimated at 11.5 pounds, up 0.1 pounds from 2008. Estimated per capita use is down from 12.3 pounds in 2007. The 2007 estimate is a recent high from a 2004 low of 10.6 pounds. Updated time series data for all-wheat and durum supply and disappearance from 1990 will be published in table 29 and table 31 at http://www.ers.usda.gov/Data/Wheat/WheatYearbook.aspx on March 19. Crop Conditions Are Mixed on the Plains Crop conditions at the end of the first week in March for Texas, Oklahoma, and Kansas are better this year than a year ago at this date. In Texas, 45 percent of this year’s crop rated good to excellent and 18 percent rated poor to very poor. A year ago only 10 percent of the crop rated good to excellent while 63 percent rated poor to very poor. In Oklahoma, 65 percent of this year’s crop rated good to excellent and only 7 percent rated poor to very poor. A year ago 21 percent of the crop rated good to excellent while 43 percent rated poor to very poor. In Kansas, 60 percent of this year’s crop rated good to excellent and only 8 percent rated poor to very poor. A year ago 45 percent of the crop rated good to excellent while 17 percent rated poor to very poor. The situation this year in Nebraska is a little different than the other Plains States. The share of the crop rated good to excellent this year is smaller than a year ago. Forty nine percent of this year’s crop rated good to excellent and 8 percent rated poor to very poor. A year ago 69 percent of the crop rated good to excellent while 6 percent rated poor to very poor.
International Situation and Outlook
Wheat Production Revised Up Slightly This Month Global wheat production for 2009/10 is projected up 0.6 million tons this month to 678.0 million tons. The biggest increase comes from revising Argentinean wheat area and production estimates. Based on a new Ministry of Agriculture report from Argentina, wheat area is increased 0.2 million hectares, or almost 7 percent, to 3.2 million hectares, still the smallest wheat area on record. Wheat yields are projected at the same level as last month, and production is increased 0.6 million tons to 9.6 million, a little higher than the previous year’s 9.0-million-ton production, but considerably below the 5-year average. Wheat production is also increased this month for Tajikistan by 0.2 million tons to reach 0.7 million, as record rainfall boosted yields, and for India and Serbia by 0.1 million tons each, to 80.7 and 2.1 million respectively. Partly offsetting these developments is a 0.3-million-ton decrease in the 2009/10 wheat production estimate for Saudi Arabia, wh ere wheat production is being phased out more rapidly than planned. The Government intends to reduce wheat purchases from local farmers by 12.5 percent a year, and rely completely on imports by 2016. Wheat area and production are estimated to fall to just 0.2 million hectares and 1.0 million tons, the lowest area and output in more than 25 years. These numbers are consistently moving down each year to the pre-wheat-expansion-program levels, the program being part of the Saudi Government’s overall strategy to diversify its economy away from oil. The Saudi Government implemented several programs including price support, input subsidies, and investment subsidies which provided zero-interest loans for farming. Saudi Arabia’s heavily subsidized wheat output started to grow in 1984/85 and peaked at 4.1 million tons in 1992/93, not only satisfying the country’s needs, but also providing an exportable surplus. However, environmental constraints and budget cuts put a brake on the country’s strategy of self-sufficiency. Growing wheat in the desert is not sustainable, and the practice is depleting the country’s scarce water supplies, especially groundwater needed for drinking. Small less-than-0.1-million-ton production changes are made for Burma, Chile, Croatia, Ethiopia, EU-27, Moldova, and Yemen based on government and international organizations’ reports. In Morocco, small area and yield changes are offsetting.
Projected Wheat Use Is Up, But So Are Ending Stocks
Global wheat consumption is projected up 1.2 million tons this month to 646.8 million, out of which 0.85 million tons is an increase in feed consumption. The largest increases are for Chinese feed and Indian food consumption, up 1.0 and 0.8 million tons, respectively. In China, a strong economy has been supporting a continued rise in demand for meat, and steady growth is forecast for the country’s pork and poultry production. In India, wheat food consumption is estimated to have increased by about 9 percent from the low 2008/09 level, despite high food inflation and increasing wheat prices. The Government is going to great lengths to make wheat available to consumers through the Public Distribution System (PDS), as well as through direct sales to bulk users at even lower than PDS prices. Food wheat consumption is decreased in the United Stares by 0.5million tons.
For Korea, projected wheat feed use is up 0.3 million tons, reaching 4.0 million, reflecting growth in its livestock sector. In Libya, Sudan, Vietnam, Bangladesh, and Iraq, wheat consumption (mainly for food) is increased by 0.2, 0.2, 0.2, 0.1, and 0.1 tons, respectively, and is decreased in Brazil (feed), Israel (feed), Mexico (food), and Moldova (feed) by 0.2, 0.2, 0.2, and 0.1 million tons, respectively, based on export and import changes in all these countries and a production adjustment in Moldova. Smaller changes in consumption are made for Burma, Chile, Colombia, Guatemala, Kenya, Serbia, and Yemen.
Despite increased use of wheat this month, global ending stocks for 2009/10 are projected up by 0.9 million tons to 196.8 million. The major change driving this increase comes from a 1.0-million-ton downward revision of Russia’s feed use number for 2001/02 and 2002/03, which resulted in 2.0-million-ton higher ending stocks for subsequent years. Ending wheat stocks for Russia for 2009/10 are projected up 2.0 million tons this month to 13.2 million. The changed series better reflects historical trends in the development of the Russian livestock sector, which experienced major restructuring and downsizing of production and consumption as a result of transition from a centrally planned to a market-driven economy that began in 1991. The main reasons for the contraction were worsening domestic terms of trade (between agricultural input and output prices) for producers and falling consumer demand for livestock products following price liberalization. The restructuring and adjustment of the livestock sector took more than a decade, and stabilization and some growth started slowly in 2003 first in poultry, and then followed by the pork sector in 2006. Since then, poultry and pork numbers and production have been increasing, while beef is still stagnating.
Wheat stocks are projected up in Bangladesh, Korea, Syria, Tajikistan, Argentina, and Iraq. Improved import prospects boosted stocks for Bangladesh by 0.3 million tons and for Syria and Iraq by 0.2 and 0.1 million tons, respectively. A 0.5-million-ton increase in export prospects for Argentina partly offsets the higher wheat production resulting in a 0.1-million-ton increase in ending stocks. In Tajikistan, ending stocks are increased by 0.2 million tons following a production revision. Small upward revisions in ending stocks are made for Kenya, Guatemala, and Uruguay.
Ending wheat stocks in China and India are both down 0.8 million tons. In China, an increase in feed use is partly offset by a 0.2-million-ton growth of imports. In India, the decline in stocks is the net effect of a combination changes: (a) the already mentioned increase in food consumption (of 0.8 million tons); (b) a rise in exports (0.2 million tons); (c) rise in production (0.1 million tons); and (d) increase in imports (0.1 million tons).Wheat stocks are also down in Belarus (a combination of lower beginning stocks and higher exports), Saudi Arabia (lower beginning stocks and production that are partly offset by higher imports), Serbia (the net effect from lower beginning stocks and higher production, exports, and food consumption), and Tunisia (import increase), by 0.2 million tons for each country. Small downward stocks revisions are made for Chile, Colombia, Croatia, EU-27, Georgia, Indonesia, Jordan, and Moldova.
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